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Investing during high inflation: Can I afford to?

In this article we cover what inflation really means for you, as well as how best to structure investments in the changing economic climate.


The Office for National Statistics regularly publish a rolling 12-month inflation rate, with the latest figure for CPIH at 7.8%* and certain to continue its upward trajectory, at least in the short-term.

It can be said that inflation is different for each household and business in the UK and depends of course on which goods or services each of us spend our money on. For example, figures show the cheapest pasta available is now 50% higher as of April 22 than April 21. Additionally, input producer price inflation, which effectively measures the average cost of purchasing raw materials to manufacture goods in the UK, was at 18.6%*. This figure is one indicator of how inflation can be forecasted by analysts, as manufacturers can only absorb rising costs for so long, before passing these costs onto the consumer. We are all starting to feel inflation’s real effects each time we do our supermarket shop, book our next holiday or when filling up at the petrol pump.

What’s the cause?

Many millennials won’t recall inflation having ever been this high, needing to go back as far as 1991 to see CPIH over 7.5%. The differences we’re seeing between now and then, are that the economic, political and social drivers at force are quite different. As global citizens, we return to work having all faced different challenges from Covid-19, national lockdowns and a halt in world manufacturing. As Europeans we are dealing with the economic fallout from the war in Ukraine which supplies much of the global food supplies, whilst Russian sanctions imposed by much of the western world are driving energy costs beyond levels of affordability for many low-income households in the UK.  It can be argued that these economic issues are insignificant in comparison to the current humanitarian crises around the world, but nevertheless illustrate the effects of our globalised economy. Finally, whether the UK has felt the full force from Brexit remains to be seen.

We as financial advisors have the inflation conversation regularly with clients, as it’s important to understand the effects on the ‘real value’ of cash savings and fixed interest investments such as bonds.

What does it mean for my savings & investments?

Whether inflation will continue to rise beyond the short term remains to be seen, and answers change depending on which economist you ask. However, it is pertinent to understand its fundamental effects on cash savings. Whilst we all need to adjust to an increasingly expensive cost of living, it is also important to ensure we do not leave too much money to be held in cash, as high street interest rates remain extremely low, thus reducing your money’s spending power significantly.

Despite many of the economic pressures being experienced across the world, financial markets have remained resilient and continue to provide many well-diversified investment portfolios with healthy returns. Of course, any investment needs to be in line with your individual attitude to risk, affordability and consider personal circumstances, which emphasises the importance of having a relationship with a financial advisor.

*Office for National Statistics figures as at April 2022.

Past performance is no guarantee of future performance; and the value and income derived from investments can go down as well as up.

For further information, please contact Jonathan Leatherbarrow to the right of this page.


Strength in Numbers Summer 2022